In The Matter Of Davis

• Decision Date: 27 October 1999
• Docket Number: No. 98-20775,98-20775
• Parties: (5th Cir. 1999) IN THE MATTER OF: CHERRY C DAVIS, Debtor; DEBBIE FEZLER, Administratrix of the Estate of RICHARD D FEZLER, Deceased, Appellant, v. CHERRY C DAVIS, Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 570

194 F.3d 570 (5th Cir. 1999)

IN THE MATTER OF: CHERRY C DAVIS, Debtor; DEBBIE FEZLER, Administratrix of the Estate of RICHARD D FEZLER, Deceased, Appellant, v. CHERRY C DAVIS, Appellee.

No. 98-20775

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

October 27, 1999

[Copyrighted Material Omitted] Before REAVLEY, HIGGINBOTHAM and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

This appeal arises from the dismissal of Appellant's complaint objecting to the Chapter 7 discharge of Texas wrongful death claims against Appellee. The district court decided that Appellant, as Administratrix of the decedent's estate, lacked standing under the Bankruptcy Code to object to the discharge. For the reasons assigned, we conclude that Appellant enjoyed the requisite standing, and, accordingly, we reverse and remand.

I. FACTS AND PROCEDURAL HISTORY

In January 1990, Cherry C. Davis (Debtor) shot and killed her husband, Richard D. Fezler (Decedent). Debbie Fezler, daughter of the decedent and Administratrix of his estate, filed a wrongful death claim in Texas State Court. Under the Texas wrongful death statute, Ms. Fezler, as Administratrix, was required to bring and prosecute the action because none of the children and parents of the deceased began such an action within three months after the decedent's death.¹ On March 2, 1995, the Debtor commenced Chapter 7 Bankruptcy proceedings. Debbie Fezler, in her capacity as Administratrix, filed an Adversary Complaint in the Bankruptcy Court objecting to the dischargeability of debts owing to the wrongful death beneficiaries. In the complaint's caption only Ms. Fezler, as Administratrix, was named as plaintiff. However, within the body of the complaint all wrongful death beneficiaries were so named: Debbie Fezler (daughter); Susan Fezler (daughter); Thomas Fezler (son); Allyson Fezler (daughter);Wayne Fezler (father); Hazel Fezler (mother). Ms. Fezler based the objection upon the Debtor's willful and malicious acts which, as provided in 11 U.S.C. 523(A)(6), are not dischargeable.

On May 18, 1995, the Debtor filed an original answer to the complaint to determine the dischargeability of debts. On June 30, 1995, the Debtor received a discharge of all debts. The district court withdrew the bankruptcy reference on July 28, 1995. The Debtor, on March 18, 1998, filed an amended answer to the complaint to determine dischargeability of debts and a motion for summary judgment alleging that as Administratrix, Debbie Fezler lacked standing to bring a complaint objecting to the discharge. The motion was predicated upon 11 U.S.C. 523(c)(1) alleging that Ms. Fezler, in that capacity, was not a "creditor to whom payment is owed" and, therefore, not a real party in interest. Ms. Fezler filed an answer to the motion for summary judgment asserting that as Administratrix she had standing to bring the nondischargeability complaint and praying alternatively for an opportunity to join the wrongful death beneficiaries as proper party plaintiffs under Federal Rule of Civil Procedure 17(a). The district court, on August 6, 1998, granted summary judgment for the Debtor and issued a "take nothing" final judgment. In so doing, the district court concluded that Ms. Fezler, as Administratrix, was not a creditor of the Debtor and thus not a proper party plaintiff to bring the nondischargeability complaint. The district court also denied Ms. Fezler's plea for joinder as untimely and for the reason that Rule 17(a) was inapplicable in that context because the initial plaintiff was not one to whom the Debtor owed a debt. ²

Ms. Fezler appealed and argues that as Administratrix she has capacity to bring the complaint and, alternatively, that Rule 17(a) required the district court to allow her a reasonable time to amend the complaint to join the wrongful death beneficiaries as proper party plaintiffs. We conclude that Ms. Fezler has standing to bring the nondischargeability complaint as Administratrix, reverse the dismissal, and remand for further proceedings. Consequently, we need not reach or consider the possible application of the ratification and joinder provisions of Rule 17(a).

II. DISCUSSION

We review the district court's summary judgment de novo. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th Cir. 1995). This appeal presents an issue of law -- whether, as Administratrix, Ms. Fezler has standing to object to the discharge of the Debtor's wrongful death debts.

Exceptions to discharge should be construed in favor of debtors in accordance with the principle that provisions dealing with this subject are remedial in nature and are designed to give a fresh start to debtors unhampered by pre-existing financial burdens. See Lines v. Frederick, 400 U.S. 18, 19, 27 L. Ed. 2d 124, 91 S. Ct. 113 (1970); Gleason v. Thaw, 236 U.S. 558, 562, 59 L. Ed. 717, 35 S. Ct. 287 (1915); 4 Collier on Bankruptcy, P 523.05 at 523-20. However, bankruptcy courts are not to be used as "a haven for wrongdoers." In re DeFelice, 77 B.R. 376, 378 (Bankr. D. Conn. 1987)(citing In re Berry Estates, 812 F.2d 67, 71 (2d Cir. 1987)(in turn citing In re Flight Transp. Corp. Securities Litigation, 730 F.2d 1128, 1136-37 (8th Cir. 1984), cert. denied, 469 U.S. 1207 (1985); In re Teltronics, Ltd., 649 F.2d 1236, 1239-42 (7th Cir. 1981)); 3 Collier on Bankruptcy, P 362.05[1] at 362-47) (bankruptcy is not a means of sheltering debtors from the consequences of their criminal acts). Rather, "one of the primary purposes of the Bankruptcy Act is to 'relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh . . . .'" Local Loan Co. v. Hunt, 292 U.S. 234, 244, 78 L. Ed. 1230, 54 S. Ct. 695 (1934) (citing Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 554-55, 59 L. Ed. 713, 35 S. Ct. 289 (1915)); see also 1 Epstein, Nickles & White, Bankruptcy 1-4, p.7 (1992)(citing Local Loan Co. v. Hunt, 292 U.S. at 244); Weintraub & Resnick, Bankruptcy Law Manual 1.02 (4th ed. 1996)(there are many caveats which must be carefully considered by the debtor before plunging into bankruptcy to pursue complete forgiveness of all debts with little or no cost or obligation). This purpose is a matter of both public and private interest as it gives to the "honest but unfortunate debtor" who surrenders his property a new opportunity in life unhampered by pre-existing debt. Local Loan Co., 292 U.S. at 244 (citations omitted).

Moreover, bankruptcy and state law are accommodated by a judicially created concept of deference to state policies that do not conflict with federal law. See Kelly v. Robinson, 479 U.S. 36, 49, 93 L. Ed. 2d 216, 107 S. Ct. 353 (1986) (concerns for federalism must influence interpretation of the Bankruptcy Code); Midlantic Nat'l Bank v. New Jersey Dep't of Environmental Protection, 474 U.S. 494, 505-07, 88 L. Ed. 2d 859, 106 S. Ct. 755 (1986) (Congress did not intend by the Bankruptcy Code for the trustee's abandonment power to abrogate state and local laws reasonably designed to protect public health and safety).

Section 523(c)(1) provides that, subject to an exception not pertinent to this appeal, "the debtor shall be discharged from a debt [for willful and malicious injury], unless, on request of the creditor to whom such debt is owed, and after notice and a hearing, the court determines such debt to be excepted from discharge." 11 U.S.C. 523(c)(1). Ms. Fezler's adversarial complaint objecting to discharge is premised upon 11 U.S.C. 523(a)(6): "A discharge under [chapter 7] of this title does not discharge an individual debtor from any debt . . . for willful and malicious injury by the debtor to another entity or to the property of another entity." The Debtor relies upon 523(c)(1) in arguing that Ms. Fezler, in her capacity as Administratrix, is not a wrongful death beneficiary and thus not a "creditor to whom such debt is owed." See 11 U.S.C. 523(c)(1).

The only requirement for standing to bring a nondischargeability action based on 523(a)(6) is that the action must be brought by a creditor. 11 U.S.C. 523(c). A creditor is an "entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor." 11 U.S.C. 101(10)(A). A "claim" is defined as a "right to payment, whether or not such right is reduced to judgment . . . ." 11 U.S.C. 101(5)(A). As Administratrix of the estate of the deceased, Ms. Fezler has been granted a claim and the right to payment against the debtor by state law. See Tex. Civ. Prac. & Rem. 71.004(c). For the reasons hereinafter assigned, we conclude that Ms. Fezler is a creditor with standing to object to the discharge of the Texas wrongful death claim.

In Nathanson v. National Labor Relations Board, a landmark Supreme Court case identifying the characteristics of a creditor, the Court held that the National Labor Relations Board (NLRB) was a creditor within the meaning of the Bankruptcy Act, and therefore had standing to bring a cause of action against a bankrupt employer for back pay owed its employees. 344 U.S. 25, 27, 73 S. Ct. 80, 97 L. Ed. 23 (1952). The Court noted that the NLRB was the "public agent chosen by Congress to enforce the National Labor Relations Act." Id. The back pay award was a debt owed the NLRB, even though it was ultimately to be distributed to the employee- victims. Id. Implicit in the Court's holding is that denying creditor status to the NLRB would frustrate its ability "to vindicate the public policy of the [National Labor Relations Act] by making the employees whole for losses suffered on account of an unfair labor practice." Id. (citing Phelps Dodge Corp. v. National Labor Relations Bd., 313 U.S. 177, 197, 85 L. Ed. 1271, 61 S. Ct. 845 (1941)).

Bankruptcy Courts have held that, much like the NLRB, the Securities and Exchange Commission (SEC), as the agency chosen by ...